The Indypendent e-news
September 25, 2008
I have no idea how I got on the email list of the Ayn Rand Center for Individual Rights but their press releases have been filling my spam box at a furious clip since last week's financial implosion. Disciples of the mid-20th Century philosopher/novelist who extolled the virtue of selfishness and who argued that the only truly free society is one that practices laissez-faire capitalism have been in a dither trying to explain away the failings of the kind of financial deregulation they support. Their conclusion is nothing if not consistent. According to a Sept. 19 press release from the Center's President Yaron Brook, “The unfree market has failed. It’s time for a truly free market.”
The Randians have focused their ire on the government for enacting policies to encourage expanding home ownership by those who didn't have the means to do so. This was certainly a contributing factor to the clusterfuck we are in now but what the Randians and other similarly-minded free-marketeers conveniently ignore is that “big government” doesn't just do what it does in a vacuum but responds to the desires of the most powerful forces in our society. Expanding home ownership was highly profitable for everyone from homebuilders to mortgage peddlers to the financial wizards who bundled these mortgages and resold them in the global marketplace. The aura of prosperity that came with the housing bubble was also key to getting President Bush re-elected in 2004.
A longer-range analysis suggests that the structural source of this crisis is the long-term (since 1973) decline of wages for U.S. Workers even as productivity (and corporate profits) has soared. Families looking to maintain a middle-class lifestyle (or in many cases, just to stay out of poverty), saw women and young people poured into the workforce in much greater numbers. When that was no longer enough, families went into debt or began tapping into their home equity like an ATM machine. Meanwhile, as the rich became ever richer, they poured their money into the markets and various speculative manias always in search of the highest possible return on investment. Under such conditions, it was inevitable that bankers would bring together the profit-seeking resources of the investing class and the home-owning aspirations of the struggling middle class to give birth to the great housing bubble. To the extent government presided over these nuptials and encouraged irresponsible behavior, its because that's what capital wanted.
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Note: Though it's easy to write off the Randians as being a marginal, fringe group or even a cult, as some have claimed, it's worth noting that one of Rand's close friends and disciples in the 1950s and 60s was none other than Alan Greenspan, a lifelong foe of government regulation who would go on to preside over the U.S. economy from 1987-2006 as Chairman of the Federal Reserve. In 2000, Congress handed Greenspan regulatory authority over Wall Street's giant financial services corporations. Unfortunately, very few people spoke out at the time.
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While some free-market ideologues are content to score theoretical points, others closer to the centers of power are looking to take advantage of the crisis to push their corporatist agenda. As Shock Doctrine author Naomi Klein recently wrote in the Guardian (UK), “Rest assured: the [free-market] ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize what is left of the public sector. We will also be told that our hopes for a green future are, sadly, too costly. For the rest of her article, click here.
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"Cash for Trash": Lastly, it's good to see that some people are keeping their sense of humor even as they fight back against the thieves who are trying to rob this country blind. One of the actions being organized for today's 4 p.m. rally at Wall Street is by folks with buymyshitpile.com who are encouraging people to cull the junk from their apartments and bring it to the financial district noting that “ since Wall Street is asking us to give them money for their worthless investments, some folks are planning to bring their OWN junk to Wall Street and see if they'll buy it. Bring your collectible mugs and limited edition Thomas Kinkade prints and add 'em to the pile!” God, I feel rich already. That 7-year-old i-book that died on me this summer whose “mark-to-market” value is zero may in fact be worth millions under Ben Bernanke's “hold-to-maturity” policy for buying up Wall Street financial products that could someday be worth whatever their owners say they are worth.
Comments
I want one of those loans that I don't have to pay back. Wow! I love the government "for enacting policies to encourage expanding home ownership by those who didn’t have the means to do so." I won't be able to pay it back but so what; I deserve to have a home. In fact, I demand my home and it can't be just any old decaying home; I want one in the suburbs and a big one too with servants and a swimming pool.
Socialism works! (tongue in cheek)
Hey,
I'm on of those 'cultists'. There's a lot of stuff here, I just wanted to say two things:
1) In no way, shape or form do Alan Greenspan's actions reflect that of what Objectivism advocates economically. If you've read 'Atlas Shrugged', he's much like Robert Stradler, who thought by compromising his principles with the government, he would still be able to do good.
2) Could you explain that link to me:
http://www.csls.ca/events/cea1998/rtw.asp
I am freaking TERRIBLE at understanding statistics. If you could link me to somewhere that really breaks that stuff down a bit better, I would really appreciate it.
Regards,
Rory
Objectivists calls for a separation of state and economics for the same reasons that we have separation of church and state. The only reason that government is able to answer the siren calls of mixed economy "businesspeople" is because... well... government is able to answer the siren calls of mixed economy "businesspeople."
Take away government's ability to intervene into the economy and you'll find that the only successful businesspeople are those who don't rely on government intervention for their success.
You are exactly right when you say that our government's policies are influenced by business. What you are missing is that Ayn Rand was very strongly opposed to the idea of businessmen or corporations being involved in the legislative process and using "capital" to influence public policy. Followers of Ayn Rand's philosophy do not "conveniently ignore" this fact, but are strong proponents of not only eliminating the ability of businessmen and corporations to influence public policy, but also to eliminate our Government's broad influence over the economy in the first place.
Our Government has no business devising housing programs to help people who do not have the means to purchase homes. Whenever it tries it will always do a terrible job and it will ultimately lead to something similar to the mess that we have now. This is simply not a proper role for Government.
The Federal Reserve needs to let the free market determine interest rates based on objective standards instead of trying to manipulate the markets by charging rates that are unrealistically low. If interest rates had not been so artificially low for such a long time, the banks would not have had the means to make the bad loans that led to this crisis in the first place.
I really don't understand how anyone can act like the financial or monetary system is a free market. The government through the quasi-private Federal Reserve controls interest rates and the amount of regulations on this sector of the economy is huge. It's repeated over and over again that the government implements a regulation and control over the economy and then when that fails (because they are immoral) they purpose more and more regulation and less and less freedom. We need to repeal the regulations and laws and have a true free market in our monetary and financial policy. The federal government also needs to get it's finances in order by cutting spending and balancing the budget. Start paying off the federal debt and watch the economy take off like a rocket. Like a Burt Rutan rocket that is not the government funded NASA ones.
The author makes a solid point when he explains that along with government policies encouraging homeownership, another major factor influencing government policies were "the most powerful forces in our society." It is without a doubt true that industry associates and individual businesses heavily lobby the government. They seek new regulatory and tax structures in order to gain a competitive edge, greater profits, or both.
What the author neglects to do in making this point, however, is to ask and answer the question of just why such a phenomenon occurs. What is it about the government that causes people seeking short-term gains to flock to it for favors?
In a truly free-market - one befret of what today seem like innocuous interferences by government - these buinesses would have no reason to try to succeed in such a manner. Those few who, unable to compete profitably by their own effort, always do turn up at the government's doorstep asking for special favor would be turned away.
What we are witnessing now is the fallout from nearly a century of taken-for-granted quasi-capitalism. The moniker "capitalist" has been expanded to include nefarious, patently non-capitalist activities such as begging the government for protection against one's own incompetence. The mixed-market which has reigned for decades has been overseen and driven by short-term thinkers; in both the private sector and the public. These are the kinds of men who fill the void left by consistent advocates and practicioners of capitalism. The two types should not be confused.
To add to Jerry's point above. In 1977 the government passed a law called the Community Reinvestment Act. http://en.wikipedia.org/wiki/Community_Reinvestment_Act
This act requires banks and savings and loan associations to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "redlining." Banks must maintain a satisfactory rating or face fines and penalties.
With interest rates artificially low along with sub-prime loans, 100% financing, and other such loan types more and more, lower income individuals with less than stellar credit decided to go out and get loans for homes. The banks who knew these people cold not pay the loans back were esentially forced to give out the loans. The banks for the most part however, did not care because they would immediately sell them to Freddie Mac or Fannie Mae which are government run taxpayer insured monsters that have absolutely nothing to do with a free market.
Imagine a free market here. No regulation and no federal reserve bank artificially lowering interest rates. A bank under this system would not loan money to someone they did not believe could pay it back. To do so would mean that they would lose money if the person defaulted. But let us say the bank planned on immediately selling these loans to some other financial institution. Who would buy them in a truly free market. Would you? No one would. To do so would mean financial disaster.
Today's system has Freddie Mac and Fannie Mae which are government sponsored giants whose investments are 100% insured by taxpayer dollars whether or not they make good or bad financial descisions. Witness the comments by the CEO of Freddie on this issue in 2004 on Youtube.com.
Free markets are the answer America's problems and the problems of the rest of the world. The author of this article is intellectually dishonest and omits many important facts and arguments that make clear that Capitalism is the only rational and moral economic system, period!
The author points to George Bush who is no Capitalist. He has presided over the largest growth of the federal government since FDR maybe rivaling that.
Just to name a few of Bush's anti-capitalist achievements:
1. Sorbanes/Oxley. This is the largest set of government controls placed on our financial system in history and one of the main causes of today's banking crisis. He signed it into law.
2. Medicaid Prescription Drug benefit coverage. Largest new federal entitlement since Lynden Johnson.
3. The Federal Budget has gone from just under 2 trillion to just over 3 trillion. A 58% increase and the largest increase in the growth of federal spending in the history in terms of real dollars. 4. McCain Feingold. Bush signed into law.
5. Bush-Kennedy No Child left behind. Massive increase in education spending. Socialism does not work and dumping more money on it will not change that.
6. Continual uncalled for artificial lowering of interest rates by the Fed Chairman he appointed, which is another main factor in today's financial crisis.
7. And to top it off in the last months of his presidency he is asking for 700 Billion dollar bailout for a problem caused largely by his economic policies.
You cannot escape the facts.
Sincerely,
Billy Jacobs
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